30th Jul 2024 11:31
(Alliance News) - A major probe into whether people overpaid on their car loans has been extended, as the UK's financial watchdog said it could decide to set up a scheme to compensate consumers.
The Financial Conduct Authority (FCA) said it was giving motor finance companies more time to respond to customer complaints.
The review was launched at the start of the year following concerns that a large number of people may have been overcharged for their car loans through discretionary commission arrangements.
The selling practice, which was banned in 2021, was used by some brokers to adjust the interest rates they charged customers so that they could receive more cash in commission.
The FCA said it was looking for evidence of widespread misconduct, and considering whether it should set up a formal redress scheme which could see people compensated in an "orderly and efficient way".
On Tuesday, the watchdog said it was assessing thousands of records spanning 14 years.
Delays in receiving the data it needs means an update on the review will not be provided by the end of September, as previously planned.
Instead, motor finance firms could be given until December 2025 at the earliest to respond to complaints. Usually, there is an eight-week deadline to respond.
The FCA said this extension would give it enough time to potentially set up an alternative way of dealing with complaints relating to discretionary commission arrangements, such as consumer redress scheme.
This is "more likely than when we started our review", the FCA said.
Lloyds, which owns car finance firm Black Horse, said earlier this year that it was setting aside about GBP450 million to cover potential costs relating to the issue and any compensation payouts.
Meanwhile, Barclays PLC is currently seeking a judicial review of a ruling by the Financial Ombudsman Service that it treated customers unfairly over their car finance agreements.
The FCA said it was taking this into account with its own investigation as it will "consider legal issues highly relevant to our review".
The regulator is now expecting to set out the findings of its work in May next year.
By Anna Wise, PA Business Reporter
Press Association: Finance
source: PA
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